The Bank of International Settlements economists propose a new method for financial market monitoring based on DLT

According to a report by Cointelegraph on September 17, an economist at the Bank for International Settlements (BIS) proposed a new approach to regulating financial risk through distributed ledger technology (DLT).


Image source: BIS official website

In a recent work paper, economist Raphael Auer proposed the so-called "embedded supervision", which will automatically monitor the token-based market. It is said that this will eliminate the need to collect, verify and deliver company-related data.

New forms of transparency and data credibility

The report points out that distributed ledger technology and smart contracts can promote financial market development through new forms of transparency and data credibility, and ultimately eliminate middleman-based data validation. To achieve these goals, embedded regulation aims to use machine learning or artificial intelligence to rely on the trust-creation mechanism of the decentralized market for regulatory purposes. The paper further writes:

“If the market based on distributed ledger technology is developed, this will change the way assets are traded and the way assets are packaged into complex financial products. The information contained in the blockchain is verified through a decentralized economic consensus. , so it can replace the current data delivery and verification process."

Orr pointed out that it is necessary for regulators and legislators to establish an ancillary framework for managing distributed markets and their infrastructure, so that distributed ledger technology will ensure higher quality compliance at a lower cost. The paper concludes:

“Embedded supervision can further help maintain the confidentiality of the company and its customers, as encryption tools can report the organization's consolidated financial risk exposure to regulators without disclosing potential personal transactions.”

Global companies are passionate about DLT-based ecosystems

Earlier this year, the Bank of International Settlements said that at least 40 central banks around the world are using blockchain technology to conduct research projects and pilots, with the goal of addressing inclusive finance, payment efficiency and cybersecurity.

In March of this year, Deutsche Borse Group, Swisscom and Swiss and Singaporean financial technology company Sygnum reached a strategic partnership to build an ecosystem based on distributed ledger technology to support emerging generations. The currency economy, these partners believe that this economy has the potential to "reshape the global financial market."